Greencoat Renewables Regulatory News (GRP)

2 Oct 2006 07:01

GruppeM Investments PLC02 October 2006 2 October 2006 GruppeM Investments PLC (the "Company") Proposed acquisition of GruppeM Hong Kong Limited ("GruppeM Hong Kong") Highlights • Proposed acquisition of GruppeM Hong Kong which operates a Porsche dealership in Qingdao, Shandong Province, East China for £4 million from Pinocelle SA, nominee company of Kenny Chen, Managing Director • GruppeM Hong Kong, established in 2005, has pre-sold all its 2006 calendar year quota amounting to 250 Porsche vehicles; plans to open two further Porsche dealerships in Shandong Province • Acquisition in line with the investing strategy at the time of the flotation on AIM in February 2005 and constitutes a reverse takeover under the AIM Rules • Consideration to be satisfied by the issue of 80 million new ordinary shares at 5p per share and subject to shareholders' approval at an Extraordinary General Meeting to be held on 25 October 2006 • Pinocelle has committed to the Company a convertible loan of £650,000, full amount payable on or before 31 October 2006, for working capital purposes • Appointment of two additional directors - Paul McIlwaine who has joined as finance director; and Julian Hardy as sales director with effect from completion of the acquisition • Second interim results for the six months ended 31 July 2006 also announced Kenny Chen, Managing Director, commented: "We believe that there are significantopportunities for the selling and servicing of Porsche cars in China. GruppeMHong Kong has a well-established relationship with Porsche China and we lookforward to developing the business further through the opening of additionaldealerships in Shandong, China's third largest province." Press enquiries: GruppeM Investments PLC Kenny Chen (Managing Director) 020 7233 2952 Paul McIlwaine (Finance Director) 020 7233 2952 Shore Capital Alex Borrelli 020 7468 7932 GruppeM Investments PLC (the "Company") Proposed acquisition of GruppeM Hong Kong Limited ("GruppeM Hong Kong") Introduction The Company announces today that agreement had been reached, subject, interalia, to Shareholders' approval, to acquire from Pinocelle SA, a nominee companyof Kenny Chen, the entire issued share capital of GruppeM Hong Kong, the holdingcompany of a group operating a Porsche dealership in Qingdao, Shandong Province,China. The Acquisition represents the first step in the implementation of theCompany's strategy of making investments in, inter alia, motor retailing inChina and the Far East, as envisaged at the time of the Company's flotation onAIM in February 2005. The consideration for the Acquisition is to be satisfied by the issue of80,000,000 new Ordinary Shares on Completion, which will represent 80 per centof the Enlarged Share Capital. On 29 September 2006 in order to satisfy theworking capital requirements of the Company, and irrespective of whetherCompletion occurs, Pinocelle has committed the Loan to the Company, being a loanamounting to £650,000 in consideration for the issue to Pinocelle of theConvertible Loan Notes, such issue being subject to the passing of certainResolutions at the Extraordinary General Meeting of the Company to be held on 25October 2006. In addition, Kenny Chen and the Company have agreed that the Director's Loan,which was due to be repaid on or after 17 August 2006, should remain in place inreturn for the issue by the Company to Kenny Chen of a Convertible Loan Note inthe sum of £115,000. The Director's Loan is now therefore subject to the termsand conditions of the Convertible Loan Notes. The Company is also pleased to announce today the appointment of two additionalDirectors. Paul McIlwaine was appointed Finance Director on 29 September 2006.Julian Hardy has been appointed Sales Director with effect from Completion,responsible for the retail sales and service operations of GruppeM Hong Kong. In view of its size, the Acquisition constitutes a reverse takeover under theAIM Rules and is therefore conditional, inter alia, upon the approval ofShareholders at the EGM. The Acquisition, the issue of the Convertible LoanNotes to Pinocelle (in respect of the Loan) and the issue of Convertible LoanNotes to Kenny Chen (in respect of the Director's Loan) also represent relatedparty transactions under the AIM Rules. If the Resolutions are passed at theEGM, the Company's existing quotation on AIM will be cancelled and the Companywill apply for the Enlarged Share Capital to be admitted immediately to tradingon AIM. Background to and reasons for the Acquisition The Company was established for the purpose of making investments in theproperty sector and motor retailing in China and the Far East. In addition tothe purchase of direct interests in land for the purposes of propertydevelopment, the Company may make investments in quoted or unquoted companies,partnerships or joint ventures, which have direct or indirect interests inproperty. The Directors believe that, given the current market conditions in China, goodopportunities exist for investment in motor retailing high value European sportscars. The trend is demonstrated by the number of marques entering China, whichis now the world's third-largest car market. Following the Company's admission to AIM, which was effective on 18 February2005, the Directors have evaluated various opportunities in China in conjunctionwith Kenny Chen whose connected companies, trading under the 'GruppeM' name,have existing business interests in China and the Far East. In particular,GruppeM Hong Kong, owned by Pinocelle, has recently established a motorretailing business operating in Qingdao, Shandong Province in China, trading inPorsche cars. The Independent Directors believe that GruppeM Hong Kong represents asignificant acquisition opportunity for the Company in line with its statedstrategy and have reached agreement with Kenny Chen, subject to Shareholders'approval, to acquire GruppeM Hong Kong from Pinocelle for an aggregateconsideration of £4 million to be satisfied by the issue of 80 million newOrdinary Shares at 5p per share. GruppeM Hong Kong has secured the distributionrights for trading Porsche cars within Shandong Province and the Directorsbelieve that the trading of Porsche cars, including used Porsche cars, hassignificant potential for growth within China. Information on GruppeM Hong Kong GruppeM Hong Kong was incorporated in Hong Kong on 1 February 2005 and is anon-trading holding company. It is a wholly-owned subsidiary of Pinocelle, theissued share capital of which is held beneficially by Kenny Chen. GruppeM Hong Kong has two subsidiary companies: • GruppeM Services whose principal activity is the provision of aftersales service and a service centre/workshop for Porsche cars; and • GruppeM Sales whose principal activity is the retail of Porsche motorvehicles. GruppeM Services is a wholly owned foreign entreprise ("WOFE"), some of the mainadvantages of which include: • independence and freedom to implement the strategies of its parentcompany; • the ability to issue invoices to customers in RMB and receive revenuesin RMB; • the ability to convert Renminbi ("RMB") profits to other currenciesfor remittance to a parent company outside China up to the amount of theinvested capital; and • not being subject to certain local taxes such as education and citymaintenance taxes. The Directors believe that there is a considerable and fast-growing market inChina for foreign cars, particularly at the high-end, luxury level. Furthermore,they are encouraged by the prospects for the Enlarged Group within ShandongProvince, China's third largest province. Porsche retailing and servicing GruppeM Sales was initially granted the Porsche dealership rights for ShandongProvince in China by way of a letter of intent ("LOI") from Porsche China.GruppeM Sales and GruppeM Services have recently reviewed a draft dealershipagreement which the Directors expect will be entered into with Porsche China inthe near future. The Directors believe that trading between GruppeM Sales,GruppeM Services and Porsche China will continue on a satisfactory basis untilsuch time as the new dealership agreement has been entered into. GruppeM Sales currently operates from a showroom in the Shinan District ofQingdao close to the service centre/workshop which together trade as the "Porsche Centre Qingdao". Porsche China runs a quota system for its dealers. Quotas are agreed yearly andreviewed half yearly. Since the showroom opened on 11 June 2005, GruppeM Saleshas pre-sold all of its 2006 calendar year quota amounting to 250 Porschevehicles. Porsche models sold are the Boxster, Carrera 911, Cayman and Cayenne,a multi-purpose sports utility vehicle which is currently the most popularchoice amongst Chinese buyers and which comprises approximately 87.5 per cent ofGruppeM Sales' committed sales to date. GruppeM Sales receives a dealer margin of 15.0 per cent, calculated on thedealer price plus import duty and shipping charges. The Directors believe thatthe margin is one of the highest in the motor retail industry in China. Chinesesales VAT of 17 per cent is payable by the customer who bears all costs inrelation to the importation of the car to China. Since 1 April 2005 China has allowed manufacturer-approved retailers, such asGruppeM Sales, to sell used cars of that manufacturer's brand. GruppeM Sales istherefore able to accept used Porsche cars in part exchange on the sale of newPorsche cars and this will facilitate trade in the second hand car market. The Directors believe that there is considerable opportunity for the marketingof Porsche cars in Shandong Province and are planning for two other Porschedealerships in Jinan and Yantai. Foreign currency exposure Turnover from the retailing and service activities of GruppeM Hong Kong isgenerated in RMB which is pegged against a basket of currencies including the USdollar. Payments to Porsche China are made in RMB. The only significant foreigncurrency exposure that arises is on the repatriation of funds to the UK althoughthe Directors do not believe that this represents a material risk to theCompany. Financial information on GruppeM Hong Kong Group For the fourteen month period ended 31 March 2006, GruppeM Hong Kong Groupgenerated a loss before taxation of £309,211 on revenue of £2,051,981. Netliabilities at that date amounted to £315,531. The Directors are confident of GruppeM Hong Kong Group achieving significantprogress as the business continues to develop. Current trading and prospects The Company announces today second interim results for the six months ended 31July 2006. The Company made a loss for the period of £208,154. Net liabilitiesat 31 July 2006 amounted to £604,160. The Directors believe that the Acquisition represents a substantial opportunityfor the Company and are confident of generating increased shareholder value asthe retailing and service activities of GruppeM Hong Kong Group expand. Financial statements for the Enlarged Group prepared under IFRS will be reportedin Sterling. Principal terms of the Acquisition Agreement On 29 September 2006, the Company entered into an agreement (the "AcquisitionAgreement") with Pinocelle and Kenny Chen to acquire (conditional uponShareholders' approval) from Pinocelle the entire issued share capital ofGruppeM Hong Kong for a total consideration of £4 million. Under the terms of the Acquisition Agreement, the consideration is to besatisfied by the allotment and issue of 80,000,000 new Ordinary Shares (the "Consideration Shares") upon Completion, of which 60,500,000 new Ordinary Sharesare to be allotted to Pinocelle and the balance of 19,500,000 new OrdinaryShares to the Initial Subscribers. Kenny Chen and Pinocelle have givenwarranties and indemnities regarding GruppeM Hong Kong under the AcquisitionAgreement. The Consideration Shares will rank pari passu in all respects with the existingOrdinary Shares, including the right to receive all dividends and otherdistributions declared, made or paid after the applicable dates of allotment. Application will be made for the Enlarged Share Capital to be admitted totrading on AIM. It is expected that Admission will be effective and thatdealings will commence on AIM on 30 October 2006. The Consideration Shares willrepresent 80 per cent of the Enlarged Share Capital. It is expected that the relevant Consideration Shares will be delivered intoCREST on 30 October 2006 and that share certificates for the ConsiderationShares will be despatched by 3 November 2006. Following Admission, the Directors will be interested in 85,500,000 OrdinaryShares representing 85.5 per cent of the Enlarged Share Capital. Directors The Directors (including the Proposed Director) are as follows: The Rt. Hon. The Lord Marsh of Mannington Kt., aged 78, Non-Executive Chairman Lord Marsh was the Member of Parliament for Greenwich from 1959 to 1970 and wasthe Parliamentary Secretary for the Ministry of Labour (1964-65) and theMinistry of Technology (1965-66). He was a Cabinet Minister from 1966 to 1970,having been first Minister of Energy and then Minister of Transport. Among themany chairmanships and directorships previously held by Lord Marsh, he has beenthe Chairman of the British Railways Board (1971-75), Chairman of the BritishIron & Steel Consumers' Council (1975-81), Chairman of the Newspaper Publishers'Association (1975-90) and Vice-Chairman then Chairman of TV-am Plc (1980-84). Since 1982 to date, Lord Marsh has been adviser to various companies includingthe Nissan Motor Company, Tokyo, Fujitec Co Ltd, Osaka and Taisei Europe Ltd. Ofparticular relevance to the Company is Lord Marsh's experience in hisdirectorships of Charles Church Group Ltd (1987-96), China & Eastern InvestmentCompany Ltd (Hong Kong) (1987-96) and Chairman and Founder of Income GrowthTrust plc (1996-2005). Kenny Chen, aged 29, Managing Director Kenny Chen is a professionally qualified architect with experience ofsubstantial property development projects. Having obtained an MA & Diploma inArchitecture from The Architectural Association School of Architects in London,Kenny Chen worked for architects in both the UK and Taiwan. Kenny Chen has worked on many high-profile projects, including the £70 millionFulham Football Club Redevelopment, the proposed £150 million New ResidentialTower at Millbank in London and the ADC Theatre, University of Cambridge. KennyChen is the founder and owner of GruppeM Europe Limited, which distributes highperformance car parts and accessories, including specialist racing air filterintake systems for GT racing and road cars. Kenny Chen also owns and managesGruppeM Racing which won the 2003/2004 British GT Championship. It was theapproved Porsche factory works team for Porsche Germany in 2005. In September2005, GruppeM Racing won the FIA GT Championship. Kenny Chen is Stephen Chen'sson. Paul McIlwaine, aged 34, Finance Director Paul McIlwaine ACA Cert PFS qualified as a chartered accountant withPricewaterhouseCoopers where he spent 10 years latterly leading changemanagement projects for The Royal Bank of Scotland Group plc, Barclays plc andThe Office of the Deputy Prime Minister. He was previously finance director ofAIM-listed Camaxys Group plc. Julian Hardy, aged 47, Proposed Director Julian Hardy holds a Masters degree in Retail Automotive Management fromLoughborough University. He has spent his career within the automotive sectorsince 1975 latterly holding senior management roles. From April 2002 to February2003 he was general manager of Brunel Ford in Bristol responsible for three Fordmain dealerships and part of Ford Retail Europe. Since that time he has beengeneral manager of Porsche Centre Reading, responsible for the budgeting,performance and profitability of the largest Porsche retail operation in Europe. Raymond Man, aged 30, Executive Director Raymond Man graduated in 2000 with a BA(Hons) in Hospitality Management from theUniversity of Central England, Birmingham. He has been with GruppeM EuropeLimited since December 2001 as Operations Manager. Prior to that, Raymond was anadministrator at Donaldson, Lufkin & Jenrette (an affiliate of Credit SuisseFirst Boston). Stephen Chen, aged 57, Non-Executive Director Stephen Chen holds a Masters degree in law from National Chung Hsing Universityin Taiwan. He was general manager for Hsing Ya Steel Mill Co. Ltd in Taiwan,specialising in waste metal purchasing and new steel production for export,between 1971 and 1981. In 1981, Stephen established Hwa Chung Construction Co.Ltd. The main focus of the business has been the master planning and developmentof the Chung Hwa village, an area of approximately 150 acres owned by the Chenfamily, with a current estimated value of £100 million. He has also beenresponsible for the development of other substantial residential and commercialdevelopments in Taiwan and Japan. In 2002, Stephen set up Ching Chen InvestmentsCo. Ltd for the acquisition and management of commercial properties in Tokyo.Investments to date include two commercial and retail buildings in Harajuku (£35million) and a commercial and retail building in Ginza (£6 million). Stephen isKenny Chen's father. Lock-in arrangements The Directors (other than Lord Marsh, Paul McIlwaine and Julian Hardy), whoseinterests in the Company will amount to 85,500,000 Ordinary Shares representing85.5 per cent of the issued Ordinary Shares on Completion, have undertaken notto dispose of any interest in their Ordinary Shares for a minimum period of 12months following Completion, except in the very limited circumstances allowed bythe AIM Rules. The terms of the lock-ins enable the parties to accept an offer for the Company,to give irrevocable undertakings to accept an offer for the Company, and to selltheir Ordinary Shares to potential offerors for the Company. Initial Subscribers Prior to June 2005, Pinocelle entered into a verbal arrangement with the InitialSubscribers for the allocation of part of any new Ordinary Shares that may beissued by the Company to Pinocelle as consideration for the first acquisitioneffected by the Company. As a result, of the Consideration Shares to be issuedin respect of the Acquisition, the allocation will be as follows: Proportion of the Consideration Shares Pinocelle (connected with Kenny Chen, Director) 75.625%Michael Beckman 1.50%Barry Carpenter 2.00%Stephen Chen, Director 5.00%Howard Freeman 1.50%Raymond Man, Director 5.00%Noble Hill Overseas Holdings Limited 4.75%Marvin Tien 2.00%Annie Tsang 0.50%Dominic Tsang 0.50%Varudh Varavan 0.625%David Yuen 1.00% 100% Messrs Beckman, Carpenter, Freeman and Varavan and Noble Hill Overseas Holdings(a company registered in the British Virgin Islands) are unrelated investors; Mrand Mrs Tsang and Mr Yuen are individual investors in the Company, but have acommercial relationship as investors with each other in other businesses whollyunrelated to the Company; and Mr Tien was a director of the Company. Save as mentioned above, the Initial Subscribers have no relationship withPinocelle, Kenny Chen or the Company. The Concert Party The members of the Concert Party are Kenny Chen, Pinocelle, a nominee company ofKenny Chen, and Stephen Chen, Director. Pinocelle was incorporated in the British Virgin Islands on 4 January 2005 as aninternational business company under the International Business Companies Act(Cap. 291) with registered number 634154. Its registered office is situated atMill Mall, Suite 6 Wickhams Cay 1, PO Box 3085, Road Town, Tortola, BritishVirgin Islands. One share of $1 in the company is held in the name of Jen-Te(Kenny) Chen. Pinocelle has one appointed director, Oaklawn Limited, and onesecretary, ILS Secretaries Limited. Pinocelle is a non- trading company with noassets other than the shares in the Company shown in the table below and inGruppeM Hong Kong. Pinocelle has not prepared any financial statements inrespect of the period since its incorporation. The interests of the members of the Concert Party in the Company are, and willbe following Completion, as follows: Number of Percentage of Number of Percentage Ordinary issued share Ordinary of issued Shares prior capital prior Shares after share to Completion to Completion Completion capital after CompletionDirectorsKenny Chen (including Pinocelle) 15,000,000 75.0% 75,500,000 75.5%Stephen Chen 1,000,000 5.0% 5,000,000 5.0% 16,000,000 80.0% 80,500,000 80.5% The City Code The City Code is issued on behalf of the Panel on Takeovers and Mergers (the "Panel"). It is kept under review by the Code Committee of the Panel. The City Code is designed principally to ensure that shareholders are treatedfairly and are not denied an opportunity to decide on the merits of a takeover.It also provides an orderly framework within which takeovers are conducted. The City Code has been developed since 1968 to reflect the collective opinion ofthose professionally involved in the field of takeovers as to appropriatebusiness standards and as to how fairness to shareholders and an orderlyframework for takeovers can be achieved. The City Code applies to all offers for, inter alia, companies and SocietasEuropaea which have their registered offices in the United Kingdom, the ChannelIslands or the Isle of Man if any of their securities are admitted to trading ona regulated market in the United Kingdom or on any stock exchange in the ChannelIslands or the Isle of Man. The City Code also applies to all offers for, interalia, public and certain categories of private companies and Societas Europaeawhich have their registered offices in the United Kingdom, the Channel Islandsor the Isle of Man and which are considered by the Panel to have their place ofcentral management and control in the United Kingdom, the Channel Islands or theIsle of Man. Under the City Code, a concert party arises when persons who, pursuant to anagreement or understanding (whether formal or informal), co-operate to obtain orconsolidate control of a company or to illustrate the successful outcome of anoffer for a company. Control means an interest, or interests, in shares carryingin aggregate 30 per cent or more of the voting rights of a company, irrespectiveof whether such interest or interests give de facto control. For the purposes ofthe City Code, Kenny Chen, Pinocelle and Stephen Chen (Director), are deemed tobe acting in concert. Following Completion, the Concert Party's holding willamount to 80,500,000 Ordinary Shares representing 80.5 per cent of the EnlargedShare Capital. Pursuant to Rule 9 of the City Code, when any person who acquires, whether by aseries of transactions over a period of time or not, an interest in shares which(taken together with shares in which persons acting in concert with him areinterested) carry 30 per cent or more of the voting rights of a company suchperson is normally required to make a general offer to all shareholders in thatcompany in cash to acquire the remaining shares in the company not already heldby them at the highest price paid for any shares in the company in the 12 monthsprior to the announcement of the offer by the person required to make the offeror any person acting in concert with him. Where any person, together with persons acting in concert with him, is alreadyinterested in shares which in the aggregate carry not less than 30 per cent, butnot hold shares carrying more than 50 per cent, of the voting rights of such acompany, a general offer will be required if he or any person acting in concertwith him, acquires an interest in any other shares which increases thepercentage of shares carrying voting rights in which he is interested. Following Completion, the Concert Party will continue to hold more than 50 percent of the Company's voting share capital and (whilst the members of theConcert Party continue to be treated as acting in concert) will be able toincrease its shareholding without being subject to the provisions of Rule 9 ofthe City Code. However, individual members of the Concert Party should contactthe Panel before buying through a Rule 9 threshold. Further details concerning Kenny Chen, Pinocelle and Stephen Chen are set out inthe sections headed 'Directors' and 'The Concert Party' above. Related party transactions The Acquisition, in view of Kenny Chen's position as a Director and also as thebeneficial owner of Pinocelle, which has agreed to sell GruppeM Hong Kong to theCompany, represents a related party transaction under the AIM Rules. TheIndependent Directors, having consulted with the Company's nominated adviser,Shore Capital, consider that the terms of the Acquisition are fair andreasonable insofar as Shareholders are concerned. On 29 September 2006, in order to satisfy the working capital requirements ofthe Company, and irrespective of whether Completion occurs, Pinocelle committedto the Company a loan (the "Loan") amounting to £650,000 in consideration forwhich the Company would, subject to Shareholders' approval, issue theConvertible Loan Notes, subject and pursuant to the Convertible Loan NoteInstrument. Of the Loan, the Company has received £260,000 and Pinocelle hascommitted to pay to the Company the balance of the Loan amounting to £390,000 onor before 31 October 2006 and, on receipt and subject to the passing ofResolutions 2, 3 and 4, the Company will issue Convertible Loan Notes for thefull amount subject and pursuant to the Convertible Loan Note Instrument. The proceeds of the Loan will be applied to satisfy the working capitalrequirements of the Company. In addition, Kenny Chen and the Company have agreed that the Director's Loan,which was due to be repaid on or after 17 August 2006, should remain in place inreturn for the issue by the Company to Kenny Chen of a Convertible Loan Note inthe sum of £115,000. The Director's Loan is now therefore subject to the termsand conditions of the Convertible Loan Notes. The issue of the Convertible Loan Notes to Pinocelle (in respect of the Loan)and to Kenny Chen (in respect of the Director's Loan) also represents relatedparty transactions under the AIM Rules. The Directors (other than Kenny Chen),having consulted with the Company's nominated adviser, Shore Capital, considerthat the terms of the Convertible Loan Notes are fair and reasonable insofar asShareholders are concerned. Working capital The Directors are of the opinion that, having made due and careful enquiry, theworking capital available to the Company will be sufficient for its presentrequirements, that is, for at least the next 12 months from Admission. Dividend policy The Directors believe the Company should seek to generate capital growth for itsShareholders, but may recommend distributions at some future date, dependingupon the generation of sustainable profits and when it becomes commerciallyprudent so to do. Taxation Investors in any doubt as to their tax position, or are subject to tax in ajurisdiction other than the UK, should consult their professional advisers Corporate governance The Directors recognise the importance of sound corporate governancecommensurate with the size of the Company and the interests of Shareholders. Asthe Company develops, the Directors intend that it should develop policies andprocedures, which reflect the Principles of Good Governance and Code of BestPractice as published by the Committee on Corporate Governance (commonly knownas the "Combined Code"). So far as is practicable, taking into account the sizeand nature of the Company, the Directors will take steps to comply with theCombined Code. The Directors have established an audit committee (comprising Lord Marsh andPaul McIlwaine) to receive and review reports from management and from theauditors relating to the interim and annual accounts and to the system ofinternal financial control. The Directors have established a remunerationcommittee (comprising Lord Marsh and Paul McIlwaine) which will, whenapplicable, determine the terms and conditions of service of executivedirectors. The Company has adopted the Model Code for Directors' dealings as applicable toAIM companies and will take all proper and reasonable steps to ensure complianceby the Directors and relevant employees. CREST The Articles permit the Company to issue shares in uncertificated form inaccordance with the Regulations. The Directors have applied for the New OrdinaryShares to be admitted to CREST with effect from Admission. Accordingly,settlement of transactions in the Ordinary Shares following Admission may takeplace in the CREST system if the relevant Shareholders wish. CREST is a voluntary system and holders of Ordinary Shares who wish to receiveand retain certificates will be able to do so. SECOND INTERIM RESULTS OF GRUPPEM INVESTMENTS PLC CHAIRMAN'S STATEMENT Overview I am delighted to announce the proposed acquisition of GruppeM Hong KongLimited, subject to shareholders' approval. GruppeM Hong Kong Limited is a HongKong based company with two Chinese subsidiaries operating a successful Porschedealership in Qingdao - an affluent city on the east coast of China. The Boardbelieves that the acquisition represents an excellent opportunity for futuregrowth in line with our investing strategy as outlined in the admission documentof February 2005. Financial results In the six months ended 31 July 2006, the Company made a loss of £208,154 afterexceptional costs of £97,323. This compares to a loss of £427,385, afterexceptional costs of £310,299, in the six month period ended 31 January 2006.The exceptional costs are in relation to the legal and professional costsbilled, and accrued, in advance of the proposed transaction announced today. Working capital There has been a further injection of capital of £260,000 into the Company, inthe form of a convertible loan, in order to fulfil its ongoing working capitalrequirements. Strategy The Board is aiming to expand the business both organically and by continuing toseek high-quality acquisitions in line with the investing strategy. The Boardbelieves it can drive growth, and thereby shareholder value, by taking advantageof the strong market conditions prevalent within the Chinese market at present. Market prospects According to the World Bank, the rapid growth of the Chinese economy is makingan increasingly important contribution to the growth rate worldwide. China hasmade the largest contribution - 13 per cent - since joining the World TradeOrganisation (WTO) in 2001. Since China implemented a policy of reform and opening-up to the outside worldin 1979, the economy has maintained robust growth, with the average annualgrowth rate in GNP reaching 9.6 per cent 28 years in a row. It is predicted thatthe Chinese economy will still be increasing by 7 per cent annually in 2020. The continued strong growth of the economy as a whole has had a significantimpact on China's 'luxury' car market. A leading Chinese marketing company'sresearch has shown that the luxury market supplied by manufacturers such asAudi, BMW, Cadillac, Mercedes-Benz, Lexus, Volvo and Porsche grew by more than45 per cent in just one year from 2004 to 2005. The Board believes that the overall growth in the Chinese economy, and thespecific market in which the proposed acquisition is operating, endorses ourinvesting strategy and represents an exciting backdrop for our proposedoperations in China going forward. Once again, I would like to thank all our employees and professional advisorsfor their hard work and support in facilitating the significant reverse takeovertransaction and we look forward to working with them again in the near future. Lord MarshChairman, on behalf of the Board INCOME STATEMENT For the six month period ended 31 July 2006 Notes Six months ended 31 July Six months ended 31 January Period ended 31 July 2006 (Unaudited) 2006 (Unaudited) 2005 (Audited) £ £ £ Administrative expenses 3 (208,133) (426,902) (168,777)Operating loss before (208,133) (426,902) (168,777)financial incomeInterest received 24 23 156Interest paid (45) (506) -Loss for the period 4 (208,154) (427,385) (168,621)Loss per shareBasic 15 (1.04p) (2.14p) (1.70p) BALANCE SHEET As at 31 July 2006 Notes 31 July 2006 31 January 2006 31 July 2005 (Unaudited) (Unaudited) (Audited) £ £ £ASSETSNon-current assetsProperty, plant and equipment 8 1,301 1,566 -Current assetsTrade and other receivables 9 8,296 5,091 8,185Cash and cash equivalents 10 - 145 94,746TOTAL ASSETS 9,597 6,802 102,931LIABILITIESCurrent liabilitiesTrade and other payables 11 613,757 402,808 71,552NET CURRENT (LIABILITIES)/ASSETS (605,461) (397,572) 31,379TOTAL LIABILITIES 613,757 402,808 71,552EQUITYEquity attributable toshareholdersShare capital 12 200,000 200,000 200,000Accumulated losses (804,160) (596,006) (168,621)TOTAL EQUITY (604,160) (396,006) 31,379TOTAL EQUITY AND LIABILITIES 9,597 6,802 102,931 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Accumulated Total capital losses Equity £ £ £Balance as at 31 July 2005 200,000 (168,621) 31,379Net loss for the period - (427,385) (427,385)Balance as at 1 February 2006 200,000 (596,006) (396,006)Net loss for the period - (208,154) (208,154)Balance as at 31 July 2006 200,000 (804,160) (604,160) CASH FLOW STATEMENT For the six month period ended 31 July 2006 Six months ended 31 July Six months ended 31 January Period ended 31 July 2006 (Unaudited) 2006 (Unaudited) 2005 (Audited) £ £ £CASH FLOWS FROM OPERATINGACTIVITIESLoss from operations (208,133) (426,902) (168,777)Depreciation 265 169Decrease/(increase) in trade and (3,205) 3,094 (8,185)other receivablesIncrease in trade and other 135,590 307,235 66,704payablesInterest paid (45) (506) -CASH USED IN OPERATING ACTIVITIES (75,528) (116,910) (110,258)CASH FLOWS FROM INVESTINGACTIVITIESInterest received 24 23 156Purchases of property, plant and - (1,735) -equipmentNET CASH RECEIVED/(USED IN) 24 (1,712) 156INVESTING ACTIVITIESCASH FLOWS FROM FINANCINGACTIVITIESProceeds from issue of shares - - 200,000Proceeds from short-term 243,717 189,372 509,468borrowingsRepayment of short-term borrowings (168,378) (165,351) (504,620)NET CASH FROM FINANCING ACTIVITIES 75,339 24,021 204,848NET (DECREASE)/INCREASE IN CASH (165) (94,601) 94,746AND CASH EQUIVALENTSCASH AND CASH EQUIVALENTS AT 145 94,746 -BEGINNING OF PERIODCASH AND CASH EQUIVALENTS AT END (20) 145 94,746OF PERIODBank balances and cash (20) 145 94,746 NOTES TO THE FINANCIAL STATEMENTS For the six month period ended 31 July 2006 1. Group and Principal Activities GruppeM Investments Plc ("Company") is a public limited company incorporated inEngland and Wales on 16 July 2004 with company number 5181790. The Company has not traded during the period. 2. Accounting Policies The principal accounting policies, adopted in the preparation of the financialinformation are set out below: (a) Basis of presentation The financial information has been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS"), including International AccountingStandards ("IAS") and interpretations issued by the International AccountingStandards Board. The financial information has been prepared under the historical costconvention. (b) Receivables Trade receivables are carried at original invoice amount less provision made forimpairment of these receivables. (c) Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. Cash andcash equivalents comprise cash on hand, deposits held at call with banks andother short-term highly liquid investments with original maturities of threemonths or less. Bank overdrafts are included within borrowings in currentliabilities on the balance sheet. (d) Financial liabilities The Company's financial liabilities include trade, payments in advance forproducts and other payables. Financial liabilities are recognised when theCompany becomes a party to the contractual agreements of the instrument. 3. Expenses by Nature Six months ended Six months ended Period ended 31 July 2006 31 January 2006 31 July 2005 £ £ £ Employee benefit costs 70,441 33,631 6,333Flotation costs 97,323 310,299 133,950Other expenses 40,369 82,972 28,494 208,133 426,902 168,777 4. Loss for the Period Six months Six months Period ended ended ended 31 July 2006 31 January 31 July £ 2006 2005 £ £Loss for the period has been stated after charging:Depreciation 265 169 -Auditors' remuneration - as auditors - 38,674 6,463Auditors' remuneration - other services(i) 44,427 46,655 5,320Directors' remuneration (note 6) 20,001 - 6,333Staff costs - wages and salaries excluding directors' remuneration 50,440 33,631 -(note 5) (i) In connection with the Company's admission to the AIM Market and proposedinvestment transaction. 5. Employee benefit expense Six months ended Six months ended Period ended 31 July 2006 31 January 2006 31 July 2005 £ £ £ Wages and salaries 45,000 30,000 -Social security costs 5,440 3,631 - 50,440 33,631 - 6. Directors' Remuneration Six months Six months Period ended ended ended 31 July 2006 31 January 31 July £ 2006 2005 £ £Directors' remuneration charged to the income statement for the period isas follows:Fees 18,000 - 6,000Social security costs 2,001 - 333 20,001 - 6,333 7. Taxation No provision for taxation has been made as the Company has made losses in theperiod. The tax assessed for the period differs from the loss before tax at the standardrate of corporation tax in the UK (30 per cent). The differences are explained below: Six months Six months Period ended ended ended 31 July 31 January 31 July 2006 2006 2005 £ £ £Loss for the period before taxation (208,154) (427,385) (168,121)Loss for the period at the standard rate of taxation of 30% (62,447) (128,216) (50,586)Addition to tax loss 62,447 128,216 50,586 - - - 8. Property, Plant and Equipment Office equipment Total £ £CostAt 31 July 2005 - -Additions at cost 1,735 1,735At 31 January 2006 1,735 1,735Additions at cost - -At 31 July 2006 1,735 1,735At 31 July 2005 - -Charge for the period 169 169Accumulated depreciationAt 31 January 2006 169 169Charge for the period 265 265At 31 July 2006 434 434Net book value at 31 July 2006 1,301 1,301Net book value at 31 January 2006 1,566 1,566 9. Trade and Other Receivables 31 July 2006 31 January 2006 31 July 2005 £ £ £ Prepaid expenses 8,296 5,091 8,185 10. Cash and Cash Equivalents 31 July 2006 31 January 2006 31 July 2005 £ £ £ Cash at bank - 145 94,746 11. Trade and Other Payables 31 July 2006 31 January 2006 31 July 2005 £ £ £ Bank overdraft 20 - -Trade payables 119,463 122,014 54,366Other payables (see note 14) 104,208 28,869 4,848Accrued expenses 390,066 251,925 12,338 613,757 402,808 71,552 12. Share Capital 31 July 2006 31 January 2006 31 July 2005 £ £ £AUTHORISED100,000,000 ordinary shares of 1p each 1,000,000 1,000,000 1,000,000ALLOTTED, CALLED UP AND FULLY PAID20,000,000 ordinary shares of 1p each 200,000 200,000 200,000 13. Post balance sheet events On 29 September 2006, in order to satisfy the working capital requirements ofthe Company, and irrespective of whether Completion occurs, Pinocelle committedto the Company the Loan amounting to £650,000 in consideration for which theCompany would, subject to the passing of Resolutions, issue the Convertible LoanNotes, subject and pursuant to the Convertible Loan Note Instrument. Of theLoan, the Company has received £260,000, and Pinocelle has committed to pay tothe Company the balance of the Loan amounting to £390,000 on or before 31October 2006 and, on receipt and subject to the passing of Resolutions 2, 3 and4 as set out in the EGM Notice, the Company will issue Convertible Loan Notesfor the full amount subject and pursuant to the Convertible Loan NoteInstrument. The Convertible Loan Note is convertible to shares at the conversion price whichis the average closing price for an Ordinary Share for the ten consecutivetrading days ending on the trading day preceding the redemption date. TheConvertible Loan Note is repayable in full at par on the earlier of (a) fivebusiness days after the service of a redemption notice such service to be on orafter the second anniversary of the date of the Convertible Loan Note Instrumentand (b) the third anniversary of the date of the Convertible Loan NoteInstrument. The Convertible Loan Notes bear interest at the rate of 2 per centper annum above the base rate from time to time of HSBC Bank PLC. On 29 September 2006, the Company entered into an agreement with Pinocelle SA,conditional upon admission to acquire the whole of the issued share capital ofGruppeM Hong Kong Limited and all its directly and indirectly wholly-ownedsubsidiary undertakings. The consideration is to be satisfied by the allotmentand issue of 80,000,000 Ordinary Shares of 1p each, credited as fully paid, inthe Company. On 29 September 2006, Kenny Chen and the Company agreed that the Director'sLoan, which was due to be repaid on or after 17 August 2006, should remain inplace in return for the issue by the Company to Kenny Chen of a Convertible LoanNote in the sum of £115,000. The terms of this Convertible Loan Note are thesame as those set out above. 14. Related party transactions During the period, the Company paid expenses on behalf of companies under thecontrol of Kenny Jen-Te Chen, a director of the Company. Similarly, thesecompanies paid expenses on behalf of GruppeM Investments PLC. At 31 July 2006,£104,208 (31 January 2006: £28,869; 31 July 2005: £4,848) was payable by GruppeMInvestments PLC to these companies, and is included in other creditors. 15. Earnings per share The calculation of loss per share is based upon the loss of £208,154 (31 January2006: £427,385; 31 July 2005: £168,621) and on 20,000,000 (31 January 2006:20,000,000; 31 July 2005: 9,895,350) being the weighted average number of sharesin issue during the period. There were no share options in issue during the period. 16. Contingent liabilities At 31 July 2006, there were two separate claims against the Company from thirdparties, both for services rendered in relation to a property development inQingdao, China. The property development is being managed by GruppeM QingdaoDevelopments Company Limited ('GruppeM Developments'), which is a Hong Kongcompany ultimately owned by Pinocelle S.A., a vehicle of Kenny Chen, but whichis otherwise totally unconnected with GruppeM Investments PLC. GruppeMDevelopments has assumed responsibility for all invoices in relation to theservices provided and has accounted fully for the liabilities in its financialstatements for the period ended 30 June 2005. On the basis of legal advicereceived, the directors believe that any liability in relation to the invoicesrests with GruppeM Developments and, as a result, believe it extremely unlikelythat the outcome of the disputes will have a material effect on the Company'sfinancial position. NEW ISSUE STATISTICS Number of Ordinary Shares in issue 20,000,000Number of Consideration Shares to be issued in respect of the Acquisition 80,000,000Number of Ordinary Shares in issue following the Acquisition 100,000,000Percentage of Enlarged Share Capital represented by the Consideration Shares 80.0%Market capitalisation at the Issue Price £5.0 million EXPECTED TIMETABLE OF PRINCIPAL EVENTS 2006Latest time and date for receipt of completed Forms of Proxy for the EGM 10.30 a.m. on 23 OctoberExtraordinary General Meeting 10.30 a.m. on 25 OctoberCompletion of the Acquisition, subject to Admission 25 OctoberCommencement of dealings on AIM in the Enlarged Share Capital 8.00 a.m. on 30 OctoberCREST accounts credited 8.00 a.m. on 30 OctoberDespatch of definitive share certificates (if applicable) by 3 November Press enquiries: GruppeM Investments PLC Kenny Chen (Managing Director) 020 7233 2952 Paul McIlwaine (Finance Director) 020 7233 2952 Shore Capital Alex Borrelli 020 7468 7932 APPENDIX Paul McIlwaine - previous directorships Camaxys Group plcCamaxys LimitedCamhealth Limited No further information is required to be disclosed under the AIM Rules. DEFINITIONS Unless the context requires otherwise, the words and expressions set out belowshall bear the following meanings."Act" the Companies Act 1985, as amended"Acquisition" the proposed acquisition by the Company of the entire issued share capital of GruppeM Hong Kong pursuant to the Acquisition Agreement"Acquisition Agreement" the conditional agreement dated 29 September 2006 between (1) the Company, (2) Pinocelle and (3) Kenny Chen relating to the Acquisition, conditional, inter alia, upon the passing of the Resolutions"Admission" admission of the Enlarged Share Capital to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules"AIM" the AIM Market of the London Stock Exchange"AIM Rules" the rules of AIM as published by the London Stock Exchange"Articles" the articles of association of the Company"Business Day" a day other than a Saturday or Sunday or a public holiday in England and Wales"China" the People's Republic of China"City Code" the City Code on Takeovers and Mergers"Combined Code" the Combined Code of Corporate Governance published by the Financial Reporting Council in July 2003"Company" or "GruppeM" GruppeM Investments PLC"Completion" completion of the Acquisition"Concert Party" Kenny Chen (Managing Director), Pinocelle, a nominee company of Kenny Chen, and Stephen Chen (Director)"Consideration Shares" 80,000,000 new Ordinary Shares to be allotted on Completion"Convertible Loan Notes" the unsecured convertible loan notes issued, and to be issued, to Pinocelle in respect of the Loan and/or pursuant to the Director's Loan in each case pursuant to the terms and conditions of the Convertible Loan Note Instrument and in respect of those to be issued to Pinocelle subject to the passing of Resolutions 2, 3 and 4 as set out in the EGM Notice"Convertible Loan Note the convertible loan note instrument dated 29 September 2006Instrument""CREST" the relevant system (as defined in the Regulations) for the paperless settlement of share transfers and the holding of shares in uncertificated form in respect of which CRESTCo Limited is the operator (as defined in the Regulations)"CRESTCo" CRESTCo Limited, the operator of CREST"Directors" the directors of the Company and the Proposed Director"Director's Loan" the term loan of £115,000 made by Kenny Chen to the Company on 17 February 2005"Document" the AIM admission document"EGM" or "Extraordinary General the extraordinary meeting of the Company convened for 25 October 2006 atMeeting" 10.30 a.m., or any adjournment thereof"EGM Notice" the notice convening the EGM"Enlarged Group" the Group following Completion"Enlarged Share Capital" the Ordinary Shares in issue at Admission following the Acquisition"Form of Proxy" the form of proxy for use by Shareholders, to enable Shareholders to appoint one or more proxies to attend the EGM and, on a poll, to vote instead of that Shareholder"FSA" the Financial Services Authority"Group" the Company and its subsidiary companies"GruppeM Hong Kong" GruppeM Hong Kong Limited"GruppeM Hong Kong Group" GruppeM Hong Kong and its subsidiaries"GruppeM Sales" GruppeM (Qingdao) Automobile Sales Company Limited"GruppeM Services" GruppeM (Qindgdao) Automobile Services Company Limited, a WOFE"Independent Directors" Lord Marsh, Paul McIlwaine and Raymond Man"Initial Subscribers" Michael Beckman, Barry Carpenter, Stephen Chen (Director), Howard Freeman, Raymond Man (Director), Noble Hill Overseas Holdings Limited, Marvin Tien, Annie Tsang, Dominic Tsang, Varudh Varavan and David Yuen"Issue Price" 5p per Consideration Share"Loan" a loan committed by Pinocelle to the Company amounting to, in aggregate, £650,000"London Stock Exchange" London Stock Exchange plc"Official List" the Official List of the United Kingdom Listing Authority"Ordinary Shares" ordinary shares of 1p each in the capital of the Company"Panel" the Panel on Takeovers and Mergers"Pinocelle" Pinocelle S.A., a nominee company of Kenny Chen"Porsche China" Jebsen & Co. (China) Motors Ltd, controlled by Porsche AG, trading as Porsche China"Proposed Director" Julian Hardy"Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755)"Regulatory Information Service any of the regulatory information services operated by the London Stock" Exchange"Resolutions" the resolutions contained in the Notice of EGM"RMB" or "Yuan" Renminbi, China's currency"Shareholders" holders of Ordinary Shares"Shore Capital" Shore Capital and Corporate Limited, nominated adviser to the Company, authorised and regulated by the FSA"United Kingdom" or "UK" United Kingdom of Great Britain and Northern Ireland"VAT" value added tax"Warrantors" Kenny Chen and Pinocelle who have agreed, pursuant to the Acquisition Agreement, to give to the Company warranties and indemnities regarding GruppeM Hong Kong"WOFE" a 'Wholly Owned Foreign Enterprise' operating in China Note: amounts in Renminbi (RMB) have been translated into Pounds Sterling (£) atthe rate of £1 = RMB15.0 unless otherwise stated. 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